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You Can't Always Get What You Want, But You Can Avoid Costly Mistakes: Insurance Issues For Oil & Gas Operators

William W. Pugh, Proceedings of 45th Annual Rocky Mountain Mineral Law Institute (1999)

Oil and gas operators need to know what insurance coverages they should maintain for their own account, and when and if such coverages should be extended to protect their non-operators. In addition, operators need to evaluate what coverage they expect from their drilling contractors (and other contractors), how the operator's coverage is intended to interact with its contractors' policies, and how (and whether) that intent can be effected. Non-operators need to undertake the same analysis, and all operators need to factor in the non-operating perspective as well. In other words, each company needs to take into account the protections that it has (whether from its own insurance program or by contract) and determine, from both an operating standpoint and a non-operating standpoint, what protections it wants, or needs, someone else to provide (whether under a Joint Operating Agreement (JOA), a drilling contract, or other contracts).

How these questions are answered will vary with each company, but it is fair to say that risk allocation through insurance begins at homewith each company developing a coordinated plan that includes input from its risk management department, its legal department, and a good insurance broker. There is no substitute for such an approach, but the purpose of this paper is to identify some significant risks that can be avoided and to examine which